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Alignment of Incentives: Optimizing Routes of Administration


Approaching an alignment of incentives and getting patients, employers, plans, and providers on the same page.


Neil B. Minkoff, MD: I want to follow up on something you said there because it’s important, and it circles back around to something that came up as we were beginning our conversation, which is the alignment of incentives. You were bringing that up in terms of revenue streams, right? One of the things that we need to be aware of while we’re thinking these things out is where the different incentives are for self-injection versus home-infusion versus office infusion versus hospital outpatient infusion. We need to consider the different ramifications of that and how we take that into account when we’re thinking about aligning the incentives. Some of you touched on that earlier. I’d love to get more in depth on how you try to align the incentives so that the patient, employer, plan, provider can all be on the same page.

Cheryl Larson: We know that many PBMs [pharmacy benefit managers] are including drugs on formulary based on rebate and excluding the 6-month wait when a new drug comes out because they’re negotiating for the best rebate. There are a lot of shenanigans that go on in the marketplace. If you then have a provider that orders that drug, in both a white bag and a brown bag situation, they may be adding to the price through office costs and other ways. We’re just floating in this sea of, “We can’t pay any more than we’re already paying.” I don’t remember where I was going with this, so Eric, I’m throwing it over to you.

Eric Cannon, PharmD, FAMCP: Here’s the amazing thing. As we look at this, and we look at where the incentives are aligned, you look at self-administered oral drugs and how much incentive sits with the specialty pharmacy or the PBM. We often malign the physician’s office saying, “They’re just making an office visit, and an infusion fee and everything else.” We’re going to talk about some studies later that look at some of those costs, but one of the things that has been critical for us as an organization is that, as we have started to share more risk across the entities, we’re suddenly having open, honest, direct conversations about what the total cost of therapy is. No longer is it about how much revenue can I make in my outpatient center versus in my physician’s clinic versus what the total cost to infuse this product is.

As you look to manage a pharmacy benefit and a medical benefit and the drugs that fall under the 2 of them combined, not only do you need to understand the cost of the products and the associated cost of administration, but you also need to understand the underlying risk agreements that exist between a plan and a set of providers. That’s where we’ve been able to have some open conversations recently within our organization [SelectHealth] to say, “If you want to administer that drug in the hospital, that’s great. Here’s how much is going to come out of your risk share.” As we start having those conversations, and we start aligning those incentives, that’s the critical piece of this, Neil. As we talk through it, it’s not so much about who’s making the revenue but who gets to recognize the revenue because what you see coming through in associated claims costs may not be reflective of the total revenue that a particular entity may make.

What was in the past maybe a more simplistic conversation about the costs of infusing at one place or the other, you now not only have to understand that, but you must also understand the incentives that may exist as far as rebates and the incentives that may exist for a particular delivery system, provider panel, or someone else based on the risk share within their provider agreements. It has to be a group conversation. It can’t be 1 entity making the decision that’s best for them, but it’s more of a conversation about how we manage the overall cost. That’s one of the things we’ve learned: we bring together those parties from the physician offices, the physician group, and then our facilities, our hospitals and clinics, to say, “Here’s our cost. Here’s how we’re sharing the risk. Let’s make the best decision for the patient and everybody else involved.” Ultimately, if we make the right decision for the patient, the client, and the employer that’s paying the ultimate bill, then if we’ve structured the agreements right, we’ll all benefit.

Michael Fine, MD: The problem is that incentives haven’t been aligned to a large degree. As was mentioned, infusions of any sort oftentimes represent revenue for the physician. It’s an important part of their practice revenue, so they may have incentives to infuse. We have moved forward and are trying to curtail that by having risk sharing or risk transfer to the providers, for which it no longer becomes a revenue stream but becomes a cost stream. That has helped. And even for the patient, patients often have better benefits for drugs under the medical benefit than they do under the pharmacy benefit. On the patient side, it may be about which drug is going to have the lowest cost, whether it be a medical drug or a pharmacy drug.

Particularly, for example, patients with MS [multiple sclerosis] are taking expensive drugs, as has been mentioned, and most of them have out-of-pocket maximums under the medical benefit. Once they hit those maximums, they pay nothing more for their medical costs. The problem is that we’ve developed a system where everything is partitioned, and the incentives are oftentimes different for patient, provider, and payer, and that’s not a good thing. We’re struggling to integrate them more, but we still have a long way to go.

Neil B. Minkoff, MD: There is even a difference in incentive on the provider side between the different entities, right? Let’s touch a bit on buy-and-bill. We’ve already touched on white bagging versus brown bagging, but even buy-and-bill can be different for a clinic versus a hospital outpatient setting, for example, and the incentives and the revenue can be different. How do you look at that, and how do you try to square that circle between authorizations, reimbursement, and so on?

Eric Cannon, PharmD, FAMCP: Neil, that’s a great question. One of the things we’ve noticed is that, even the practice patterns of a particular physician may drive what you’re looking at. You may be thinking that this is a bad thing because this particular physician is doing buy-and-bill, and they’re going to be getting a whole bunch of revenue off of this. Then when we look at their practice patterns, we find that they’ve elected to do an infusion schedule that may be 8 weeks instead of 6 weeks. When we look at the overall cost of the patients receiving care from that particular physician, we’re all gung-ho, we’re going to stop the buy-and-bill. But when we look at it, the cost to treat a particular patient with that particular physician may be $5000, $10,000, or $15,000 less a year than a physician who isn’t doing buy-and-bill.

That’s the piece that’s tricky here, sorting through whether they are doing not only buy-and-bill, because buy-and-bill comes with its own host of issues you have to sort through, and there are perverse incentives that may exist. But we must understand the practice patterns of that particular physician and making sure that we’re looking at how we drive toward the lowest cost. As I’ve talked to colleagues across the country about what may be happening in a particular area, and we think, “Oh my gosh, they’ve just given us a complete hint on something we can do to lower our costs;” when we go look at it, we see the exact opposite of what they were experiencing somewhere else.

Ultimately, you’ve got to go to the data. You’ve got to go to the providers, and it’s in that partnership of how you align the incentives and how you work together to drive the best care for a particular patient and not so much any one particular business practice. Is it buy-and-bill, is it white bag, is it brown bag? It’s more about saying, “Let’s look at how care is delivered in our area and what’s going to drive the best outcomes for our patients.”

Kevin U. Stephens, Sr, MD: Something that we didn’t talk about, though, is that there has been an issue in the past with large hospital systems acquiring the physician practice. The physician, instead of being an independent shop where they had same group specialty or even multigroup specialty, they’re now completely owned and fully integrated in the hospital, and the acquisition of medications, pharmacy supplies, and so forth is done through the hospital. That decision is taken out of the physician’s hands. Even then, when you transfer risk as you said, then the whole system is the entity, and they have fully integrated systems of networks where everything is in 1 big bucket and everyone is on salary, getting bonuses based on productivity. It’s a whole different system than the mom-and-pop physicians who have 2 or 3 doctors in 1 office, and they have their billing and collection, and that kind of thing. It’s a complicated picture.

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